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A maxim of the renewable energy sector is that costs are dropping fast, thereby making them likely to be more competitive with conventional energy in the near future and that this is due to subsidies creating sales and generating movement on the learning curve. In the case of photovoltaics, this argument needs closer examination, especially in light of the large and growing subsidies for the power.

A modern solar cell (Photo credit: Wikipedia)

First and foremost, it is true costs have been dropping rapidly for several decades and will probably continue to decline—but in part, because costs for most things decline over time with technological advances. This is well documented by academics like Dale Jorgenson and John Tilton.

Also, Clean Tech supporters often assert that the point of competitiveness will be accelerated because conventional energy prices must rise, primarily because of depletion of fossil fuel resources. But they don’t seem to think that the depletion of silicon needed to make photovoltaic cells; depletion matters, but the rate of depletion is often exaggerated.

The reality is that conventional energy sources do not tend to rise in price over the long term. The retail price of electricity in theUSis largely unchanged over the past four decades, despite the oil crises, much stricter emissions regulations, and the problems of the nuclear power sector. Before that, prices had dropped sharply.

Oil and gas prices have been manipulated and regulated for most of their history, but tend to be flat—outside of bubbles. Removing the assumed increase in conventional energy costs means that the day when photovoltaics becomes broadly competitive is much further in the future than proponents expect.

And, although it is a minor point, the sharp drop in costs for photovoltaic cells is exaggerated by the fact that the first cells were manufactured for use in satellites and were made to operate under extreme conditions. More recently, a glut in manufacturing capacity has depressed prices, and will be presumably reversed when the glut disappears. Proponents point to the sharper decline in the past few years without taking this into account.

Finally, the presumption that subsidizing purchase of expensive products like photovoltaic cells will bring costs down is largely fallacious. The biggest cost reductions come in the early phases of production, as the new technology is studied and optimized, and these have already been reached for photovoltaic panels. Major new improvements will occur in the laboratory, not on the production line or by installers.

All in all, proponents of photovoltaics are trying to divert attention from solar’s high costs by pointing to declining cost trends, but this argument should be used to support research, not production subsidies.